Speaker Summary: Professor Cintia Külzer-Sacilotto

Key Takeaways

• Despite high carbon emissions per capita, Middle East countries are increasing their ambition towards net-zero. Countries in the Gulf Cooperation Council (GCC) are among the world’s highest emitters per capita. Carbon intensity in these countries is 80% higher than that of OECD countries, and per capita energy consumption is double.¹ Nevertheless, there is significant momentum supporting net-zero commitments by 2050 or 2060. The agreements pledged by the annual Conference of the Parties (COP) under the United Nations Framework Convention on Climate Change (UNFCCC) have played a role in catalysing this change and encouraging businesses to align with global and national climate and sustainability goals.
• Adoption of ESG strategies and green bond investments are on the rise. Companies in the Middle East are advancing their ESG engagement. For example, only 18% of organisations surveyed in the region reported implementing ESG strategies in 2022, growing to 64% the following year.² Green bond investment also experienced a 1,300% growth in the region from 2021 to 2022.³
• A diversification in economic activity away from oil and gas could boost economic resilience in the region. The Middle East’s vulnerability to the impacts of climate change is evident in local challenges such as water scarcity and limited food production capacity. According to the World Bank, climate impacts in the region could result in a 6% reduction in GDP by 2050 across some countries.⁴ The region’s heavy reliance on oil and gas (20-50% of GDP) and its contribution to global warming underscores the need for diversification into other sectors, such as tourism, real estate, and agri-tech, to ensure economic resilience.
• Islamic Law provides an in-built ‘double accountability’ approach that supports ESG. Certain aspects of Islamic finance regulation are well-positioned to integrate ESG considerations. The ‘double accountability’ of general financial regulators in Islamic Law promotes better disclosures and accountability in the financial sector.

Conclusion

The physical consequences and economic impacts of climate change, alongside global climate agreements and events such as the UNFCCC’s annual COPs, are driving the region’s engagement in sustainability efforts. Businesses in the region are increasing their net-zero commitments and looking for diversification opportunities away from oil and gas, but face multiple challenges as a significant proportion of the region’s GDP is linked to fossil fuels.   

Links

• Cintia Külzer-Sacilotto — United Arab Emirates University (uaeu.ac.ae)
• ¹ Our World Data https://ourworldindata.org/co2-and-greenhouse-gas-emissions
• ² “Moving from Start-up to Scale-up on ESG”: The 2023 Middle East Report. PwC, 2023.
• ³ “Strong pipeline of green bonds likely from Middle East in 2023” The National News, 2023.
• ⁴ “High and Dry: Climate Change, Water, and the Economy” World Bank, 2016